ORIX Corporation

Now it's time to start the RX Corporation's financial results briefing for the six-month period ended September 30th, 2023. Thank you very much for joining us today. I'd like to act as a moderator. I am Nakane from IR Sustainability Promotion Division. Today, we have Mr. Makoto Inoue, the President and CEO, as well as Mr. Hitomaro Yano, in charge of accounting and treasury and investor relations. There are some housekeeping announcements. In order to prevent any interference, if you have any mobile phones or telecommunication devices nearby, please make sure to turn them off or move away from those devices. First, I will call upon Mr. Yano and then Mr. Inoue to make presentations and then take questions. We plan to spend about one hour. Now, Mr. Yano.

Thank you for the introduction. This is Sayano speaking in charge of accounting and treasury and investor relations. Thank you for taking time out of your very busy schedule to participate in today's briefing. I'll start by explaining about our fiscal 24 March results. Please turn to page two. For the first half of fiscal 24 March, Oryx reported a net income of 128.1 billion yen, up 4.7% year-on-year. This translated into annualized RE over 7.0%. Please turn to the next page. This is the breakdown of segment profits. First half segment profits were up 11% year-on-year. It was 191 billion yen. This slide shows past trends of segment profits on a full-year, quarterly and half-year basis from left to right. Base profits are dark blue and the investment gains are in light blue. At the far right of the trends for the half-year basis, base profits were up 16% year-on-year to 167.4 billion yen. This was primarily due to a recovery in the real estate and the concession business earnings thanks to higher inbound tourism and the higher profits of the insurance segment as a result of higher investment income. Meanwhile, investment gains in light blue were down 14% year-on-year to 23.6 billion yen. These were primarily due to investment gains on sale of multiple real estate properties booked in first half. Our CEO will discuss this later on. We plan to aggressively move forward with sales in the second half of this fiscal year. Please turn to pages 4 and 5 next. This gives a breakdown of segment profits and segment assets. This should give you a good overview of segment trends as a whole. Detailed information about each segment can be found from page 16 and beyond. Please review them in your own time. And I will just give you a brief overview using page 4 and 5. First is corporate financial services and maintenance leasing. Segment profits rose 9% to 40.3 billion yen. Corporate financial services, various feed businesses were performing well and profits were up in the first half as M&A brokerage contributed to profits. In the auto business, used car prices remained high and rental car demand is strong continuously. And rented profits were lower year-on-year owing to the costs associated with the launching of new technology center, but this unit has posted steady profits. Moving on to real estate. Segment profit was up 42% to 26.9 billion yen. In the investment and operations, profits were up thanks to improving earnings in the facility operation business, hotels and inns, on a recovery in inbound tourism demand, and office and real condo sales were also booked. In the daikyo units, profits were up sharply on strong condo sales. In real estate assets... In early estate, assets were up 69.4 billion yen versus the end of last year as a careful selection of new assets continued alongside proactive sales. Next is P and concession. Segment profits were up 141% year-on-year to 9.7 billion yen. In the P investment units, segment profits were up year-on-year as profit contributions from DHC and Hexelworks increased. which were acquired last year, offset lower profits from other investments and impact of investee sales last year. The concession unit returned to the black for the first time on a quarterly basis since the start of the pandemic on the recovery of international passenger numbers. And there's a three-month delay in this profit reflection. And the segment assets were up 200%. 3.3 billion yen versus end of fiscal 23 March, with the execution of Toshiba LP and the mezzanine loan. Next is environmental energy. Segment profits were down 7% year-on-year to 8.1 billion. In the domestic energy business, segment profits were up slightly year-on-year, thanks to a large number of sunny days in the second quarter, which offset the impact of output curtailments in the Q1. In the overseas energy sector, Although profits were down year-on-year due to higher hedging costs on foreign currency denominated assets caused by higher interest rates, profit contributions from LR1 were higher and the green card profits were also up year-on-year. Segment assets were up 59.6 billion yen year-to-date owing to forex changes.

Next is the insurance segment. The segment profits were up 151% to 37 billion yen. Segment profits rose on an increase in investment income thanks to the weaker yen and higher interest rate, as well as lower COVID-related payouts. Segment assets were up 53.3 billion yen on four exchanges. BANKING AND CREDIT Oryx Bank continues to strengthen its profitability through growth in the trust and other businesses and not by unnecessary increasing assets. As a result, banking segment assets were flat versus a year ago. In credit business, both assets and segment profits are mostly flat year in year. Next is aircraft and ships. Segment profits were 10.4 billion yen down 2% year-on-year. In the ship business unit, profits were down year-on-year. An absence of year-earlier gains on timely sale of owned vessels during the period of high prices. This was in line with our initial targets. Four ships were sold during the first half. Aircraft leasing posted higher profits amidst the recovery in passenger demand. Leasing revenues rose thanks to higher lease rates and increase in the number of owned aircraft. Avalon turned profitable on a quarterly basis after accounting for hedging costs thanks to a rebound in passenger demand. Segment assets were up 164.3 billion yen on forex effects and an increase in owned aircraft. Next is Oryx USA. Segment profits were down 24% to 16.3 billion yen. There were fewer exits in the PE business owing to changes in the macroeconomic climate, which was the primary reason for lower profits in the segment. Segment assets were up 63.4 billion yen in OCU. Local currency denominated assets are lower as Oryx. Ongoing enhanced risk management has led to OCU to rein in new investments, but changes in the forex led to higher yen-denominated assets. Next is OREX Europe. Segment assets were down 19% to 13.4 billion yen. Profits are lower owing to hedging costs on forex-denominated investments primarily at Robeco Group caused by higher euro interest rate. However, AUM on a recovery trend with the launch of active ETFs and fee income is stable. Segment assets were up 35.1 billion yen year-to-date, mainly due to forex changes. Segment profits are down 49% a year to 12.4 billion yen. This is finally the Asian and Australia. Profits fell due to the absence of gain on sale in the Southeast Asian affiliate in the same period of the previous year and lower profit contributions from investees. Despite this, leasing and loan operations were healthy in Asian countries. Segment assets were up 174.8 billion yen year to date, owing to foreign exchanges and due to favorable new lease executions in various countries. I'd like to also make some comments on the impact of rising yen interest rates. Yesterday, BOJ reported announced the new policy and they have made upward revision to the long-term interest rate. For Oryx, especially for the financial businesses, the higher interest rate in yen will be the positive. Oryx Bank Holes, variable interest rate assets, especially those linked to the long-term prime rate of close to 1 trillion yen, arise in the yield curve during the period of higher interest rates, therefore will have a positive impact. In insurance, asset rotation in our investment portfolio leads to higher yields during the times of rising interest rate. Also, more than anything, the reduced present value of the insurance liabilities outweighs decline in in asset value, which will benefit embedded value. This will also bolster future earnings. In the domestic corporate financial services business, we have held off on aggressively pursuing additional financial finance leasing business because of low interest rates and excess liquidity. However, higher interest rates could be an opportunity for this business to grow. So that was about the rising yen interest rate. And with that, I'd like to end my presentation and the microphone to Mr. Inoue, our CEO.